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The Face of Change

One of the inherent beauties of self-storage is its intrinsic simplicity. I have often advocated blending new technology with good real estate to make the best possible, or "best in class," self-storage project, but it isn't always easy to balance the two. The physical part of the self-storage business is changing right before our very eyes. New products are released regularly that affect the way we conduct business--now and in the future.

The rise and fall of the dot-com industry was made possible by technology. While some were heroes--and others victims--of the lightning-speed roller-coaster ride, the debacle left some terrific technology. We should combine some of those efforts with steady developments in the self-storage industry to move forward into the next era.

A History of Self-Storage Technology Use

You may have heard speakers, lenders and industry leaders talk about first- generation, second-generation and current state-of-the-art properties. Following are explanations of these facilities and the extent to which each uses technolgy.

First-Generation FacilitiesConstructed between 1970 and 2001 in some rural markets, these facilities typically include fewer than 400 spaces (totaling less than 45,000 square feet) and offices of fewer than 150 square feet. Often built in industrial-park settings, they generally have manual gates and chain-link fences, but no on-site computer, video surveillance or door alarms. They are usually single-story with unpaved lots. They do not feature climate-control equipment and are often accompanied by a Yellow Pages ad that states they have the "lowest prices in town." These facilities typically have owner-operators referred to as the "moms and pops" of the industry. Cap rates for this product, unless the location is phenomenal, range from 10 percent to 12 percent. They are difficult to finance through any means other than a local bank, and very difficult to sell to a REIT or major player.

Second-Generation FacilitiesConstructed between 1985 and 2001 in some markets, these facilities included technology on new construction--or added technology and upgrades to first-generation properties--making relatively small improvements. They may be better located than first-generation properties in that they are not always in industrial parks, but are frequently not in the best locations either. Some of these facilities landed terrific locations because zoning officials did not know, toward the middle of the era, what to do with the asset type and allowed them into some areas. The bulk of the Public Storage, U-Haul, Uncle Bob's, Storage USA and the U-Store-It portfolios fall into this category.

These facilities generally have paved lots, access-control gates and on-site computers with DOS-based software. A few have cameras for video surveillance, and some have perimeter beams. Offices typically range from 150 to 250 square feet with all-glass doors replacing residential-type doors and wrought-iron fences replacing chain-link. Most of these properties were developed in a fortress configuration and have more than 400 spaces. A few have added climate- controlled buildings. Many are targets for acquisition by any of the major players--if they are well-located. Typically, these properties carry cap rates in the 10 percent range, and owners can expect deductions for deferred maintenance at the time of sale. These properties are relatively easy to finance and easy to sell.

State-of-the-Art FacilitiesConstructed between 1995 and 2001, these facilities often include multistory, climate-controlled buildings in combination with single-story ground-access space, and are in high-traffic, high-visibility locations. These are more often than not referred to as "stores" rather than "facilities" since their offices and retail-sales areas are approximately 600 square feet. These properties are typically built by Extra Space, Public Storage, Storage USA and many regional players. They often have great signage, and many, due to zoning regulations, do not even look like self-storage facilities.

Often these stores range from 60,000 to 85,000 square feet. They have access-control gates, video surveillance with taped backups, fully computerized offices and at least two computers on site. In addition, they may have motion-sensored lighting in hallways, zoned temperature and humidity control, automatic sliding doors at loading entrances and offices similar to an upscale retail store. Desks are typically built into the counter, and the business areas are well-lit and very professional. Most of the employees wear a uniform or adhere to a dress code. Cap rates for fully stabilized, well-located stores can fall as low as 9.25 percent. These stores are relatively easy to finance and easy to sell.

Second-generation facilities can easily be upgraded to state-of-the-art stores. While they can be expensive to upgrade, these properties can compete head-on with newly built state-of-the-art stores if their locations are good. The second-generation property is an ideal acquisition candidate, and owners can expect to be paid top dollar for such stores, particularly if they are full with room to expand.

Toys or Tools--You Make the CallTechnological improvements are a part of our lives--the microwave, fax machine and cell phone are a few. The Palm Pilot is one of those life-enhancing products I use every day. I am investigating how I can more fully integrate this technology into daily self-storage activity, such as inventory checks, vacancy control and delinquency follow-up. While the Palm Pilot may be thought of as a toy by some, it may become a regular part of conducting business. Let's discuss a few other innovations that can make our self-storage lives easier.

Paper, Paper, PaperI am convinced we will never quite be a paperless society, and those in the self-storage industry should recognize advocating a paperless society is counterproductive. We want those nasty boxes of records piling up in the offices of potential clients! It translates into more self-storage business. But for ourselves, with the exception of auction accounts, the need to keep hard copies of move-out data is questionable, if not obsolete.

Hewlett-Packard and other companies make an all-in-one scanner/fax machine/ printer that could make move-out paperwork a thing of the past. The key is to make certain the machine has a sheet feeder and can reduce legal-size documents to fit on letter-size paper, as many of our lease agreements are legal-size. Imagine having your monthly move-outs stored on a CD. When you need to access a move-out, you simply print the paperwork as if it were a copy of the original document. Best of all, you can throw away all the hard copies. (Once again--I am not suggesting auction files or those regarding abandoned units be handled in this manner.)

Phones, Faxes and Long-Distance Calling

Let's talk about faxes. I am a loyal fan of the free service e-fax (www.efax.com), which converts faxes into e-mails and allows you to store them digitally in directories. Your faxes are available until you delete them and can be accessed from any computer with an Internet connection. As files, they can be forwarded to a central server and accessed by others. You can save all of your faxes on a CD. E-fax allows you to fax directly from your computer as well (there is a small monthly charge for this capability, but it is well worth it). For an additional $10 per month, you can even have a toll-free fax number.

While on the subject of toll-free calls, I'd like to mention the website www.dialpad.com, through which you can make national long-distance calls at no charge. The sound quality of phone calls made through this site is slightly lower than that of those made over traditional phone lines. For important client-related calls, I recommend using standard phone lines. But the cost advantage is indisputable. Through Dialpad, my long-distance rate to Europe is 4 cents per minute, and the quality is similar to that of domestic calls.

Regarding telephones themselves: The new 2.4 GHz phones have dramatically greater range and quality than the old 900 MHz cordless phones. Battery times are better, and the phones are smaller. The cost is very reasonable, and I personally like the V-Tech multihandset phones, which do not accommodate multilines at present, but are likely to in the near future.

As voicemail services are so reasonably priced, no office should be without one to take off-hour calls. For just a few dollars each month, you can have 24-hour backup on your phones. With caller ID, you can monitor traffic and missed calls, which is an important aspect of daily site management. I like a program called Win-Fax, which records dates, times, numbers and the duration of phone traffic. It lets me know when our offices are the busiest and from where our phone traffic is coming. It also provides a history of numbers so I can capture them for marketing or collection purposes.

Web Conveniences

As you can see, many of these innovations are Internet-based. If you believe the Internet is a fad or just a marketing gimmick, you probably had the same reservations about the fax machine--but there isn't a business around without a fax machine these days. The Internet's capabilities reach far beyond glorified advertising (although it does a fantastic job providing detailed information about a facility). Some of the best innovations in Internet marketing are sites that give customers the ability to rent spaces online, including unit selection and processing credit-card payments.

Security Systems

The digital age is upon us, and now that prices have begun to decline, digital technology is becoming more common in the self-storage industry. Take, for example, the ability to take photos and store data in digital format. I recently had the opportunity to see digital-camera technology in action at a self-storage tradeshow. During a seminar, one of this industry's popular security vendors plugged a laptop computer into a phone line, connected it to a projector and, within minutes, we were watching live camera activity of a facility hundreds of miles away. I do not know what it takes to impress you, but that was pretty amazing to me.

The seminar discussed the merits of digital recording. While it seems its costs are still greater than a VHS-tape system, the long-term benefits can override the expense. I like the idea of being able to store camera activity on a hard drive, then easily storing a backup copy off-site. I think here of a situation where several units were broken into at a facility. The next day, the perpetrators came back, broke into the office, stole the VCR and destroyed all the tapes. If the data had been digitally stored and backed up, there might be some interesting records of the activity.

Digital images are also an easy way to take and store identification photos of your tenants. What a great way to discourage thieves and avoid potential risks. I strongly advocate the use of photos to verify who has access to your facility. And what if you could try a starter system for less than $200? I saw one Internet promotion for $169 that included three microcameras and addressable power supplies, as well as a wireless video receiver, transceiver module, video-camera remote control, battery pack, motion detector, cables and more.

Wireless Door Alarms

I remember dealing with retrofits of hardwired door alarms, sometimes abandoning a project because of expense and lack of access to tenant spaces that precluded a smooth installation. Door-alarm technology is improving greatly, and the band signals have been changed and upgraded. Newer systems require fewer transponders, and false alarms have decreased. The price has started to inch downward, and the older systems will be obsolete in just a few years. But before you invest in wireless technology, make certain the equipment is compatible with your software and graphics display. Do not sacrifice good management controls in software just to accommodate individual door alarms. (For a list of self-storage security providers, including those offering digital-video technology and wireless door alarms, visit the online buyer's guide at www.insideselfstorage.com and click "Security and Access.")

Software: The Great DOS Loss

All of the major players that produce self-storage management software have introduced at least one version of a Windows-based program to replace earlier DOS versions. But many operators (including large operators like Public Storage) have not yet made the move to Windows. I can only imagine the expense and time such a conversion would require.

New enhancements to software packages vary widely from vendor to vendor. Below is a list of just some of the features available. (For an extensive list of software suppliers, see the sidebar accompanying this article. For more detailed information, stay tuned for the Inside Self-Storage annual software issue, May 2002.)

On-screen, interactive facility maps.

E-mail of letters and notices to customers.

Automatic verification of customer addresses.

Automatic sending of reports via e-mail to home office, owner, etc.

Attachment of digital photos to customer records.

Printing of letters/receipts in foreign languages.

Data backup via the Internet.

Automatic lease management.

Automatic bank drafts and electronic check deposits.

Remote access of databases and surveillance cameras via the Internet.

It appears the face of change is a friendly one. With new advances in everything from alarms to software, storage operators have more choices than ever. Technology enables them to become more efficient, realize greater sales and use more marketing tools--and maybe even save a few dollars in the process.

RK Kliebenstein is president of Coast-To-Coast Storage, with offices in Boca Raton, Fla., San Diego and the Washington, D.C. area. Coast-To-Coast is a self-storage consultancy business that assists developers and owners in operating more efficiently and profitably. For more information, call 561.367.9241.